ssrn-id237552 - Georgetown University Law Center 2000...

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Unformatted text preview: Georgetown University Law Center 2000 Working Paper Series in Business, Economic, and Regulatory Policy and Public Law and Legal Theory Working Paper No. 237552 The Tax of Physics, The Physics of Tax by Stephen Cohen A revised version of working paper is forthcoming in the Green Bag This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection at http://papers.ssrn.com/paper.taf?abstract_id=237552 Professor of Law, Georgetown Law Center. 1 See R OBERT L. F ORWARD , M IRROR M ATTER : P IONEERING A NTIMATTER P HYSICS (1988). 2 233 F.2d 935 (6th Cir. 1956). 3 I am deeply indebted to Prof. Marvin Chirelstein, who raised my consciousness about Bradford in his basic income tax course at the Yale Law School in the spring of 1970. 4 The actual numbers of this case, as well as of other cases cited in this essay, have been modified to simply the presentation. 1 THE TAX OF PHYSICS, THE PHYSICS OF TAX Stephen Cohen * Sometimes ideas from science illuminate muddled legal thinking. Physics teaches that, for every particle of matter, there exists a corresponding particle of anti-matter. A particle of matter and its corresponding particle of anti-matter are identical except that they have opposite electrical charges. A proton&s charge is positive, an anti-proton&s negative. When matter and anti-matter meet, they produce the most powerful explosion in nature, totally annihilating each other. These ideas help explain the Sixth Circuit Court of Appeals decision in Bradford v. Commissioner . Bradford involved a baffling departure from established rules for taxing the discharge of a debt. The facts were as follows. Mrs. Bradford, the taxpayer named in the case title, and her husband, Mr. Bradford, resided in Nashville, Tennessee. Mr. Bradford was a partner in a securities firm with a seat on the New York Stock Exchange (NYSE). In 1938, the NYSE decided to require every partner of a member firm to disclose his debts. At the time, Mr. Bradford owed a Nashville bank $300,000. 5 Although not an issue in the case, Mr. Bradford may have committed fraud in 1938 when he arranged for his wife to assume $200,000 of his bank debt and failed to disclose this fact to the NYSE when reporting his debts. The NYSE may also have been at fault for not requiring the disclosure of debts owed by either the partner of a member firm or the partner&s spouse. 2 He had borrowed the money in early 1929 and invested the funds in a number of banking ventures. Although the opinion does not reveal the fate of these ventures, the timing--he invested just months before the 1929 stock market crash--makes it probable that he incurred substantial losses....
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This note was uploaded on 10/24/2011 for the course SCIENCE PHY 453 taught by Professor Barnard during the Winter '11 term at BYU.

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ssrn-id237552 - Georgetown University Law Center 2000...

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